Porting a Web Service to VM

Microsoft has requested that we move our existing systems running on the old portal to a VM by 5/15. Do you have to create a local VHD? I read the articles posted but I am not sure and my windows 2008 cannot create a VHD - not supported processor. Can someone outline the steps to get a Web Service ported over to a VM and the associated client? If the VHD is a must do you have to add an OS? Can I use any VHD creator? Thank yo kindly.